Emerging Equities Inc.

Terms and Conditions

Decision rendered on November 8, 2021

Duration of Terms and Conditions

1. The Terms and Conditions shall continue and remain in full force and effect until, from the effective date of the Terms and Conditions, a period of 6 months has elapsed during which EEI files Monthly Financial Reports that show:

  1. Risk Adjusted Capital (RAC) exceeds $300,000
  2. Early Warning Tests are not triggered, except in the following circumstances:
    1. The Early Warning Test is a frequency test; and
    2. The Early Warning Test triggered is a profit test that would not have been triggered without the decrease in revenue associated with a write-down in the value of EEI’s principal inventory.

For greater certainty, the Terms and Conditions will remain in full force and effect for a period of at least 6 months. At the conclusion of six months, if all of the Terms and Conditions have been satisfied, EEI may apply to the decision-maker through the National Hearing Officer, with a copy to IIROC Staff, to have Terms and Conditions modified or removed.

Engagement of Financial Monitor:

2. Within 60 days of the effective date of the Terms and Conditions, EEI shall engage a qualified Financial Monitor. The Financial Monitor shall be a partner at a Chartered Professional Accounting firm approved by an IIROC District Council as a Panel Auditor.

3. The Financial Monitor will provide to IIROC a report on specified procedures as mutually agreed by EEI and IIROC to verify that information reported in the MFRs are accurate and complete in accordance with IIROC rules, and that management exercises discipline in forecasting short-term capital requirements.

4. The agreement with the Financial Monitor will be subject to IIROC’s written approval.

5. Any change, removal or termination of the agreement with the Financial Monitor will be pre-approved in writing by IIROC, such approval not to be unreasonably withheld.

Continuance of Financial Monitor Requirement

6. Subject to paragraph 7, in the event that EEI submitted MFRs does not trigger Early Warning (EW) status (other than triggers attributed to frequency tests) for a period of four consecutive months, and maintains a RAC of not less than $300,000, the Financial Monitor shall no longer be required to perform the functions outlined in paragraph 3, but will remain available for the duration of the imposition of the Terms and Conditions.

7. The immediate requirement for the Financial Monitor to perform the procedures outlined in paragraph 3 will be renewed on a go forward basis if any of the following events occur during the term of these Terms and Conditions and are not cured as described:

  1. Early Warning Trigger – EEI reports an EW trigger on an MFR filing. EEI may cure this event by contributing, within 10 business days of the MFR due date, the amount of regulatory capital that, had it been included in Regulatory Financial Statement Capital at the relevant month end, would have resulted in EEI not triggering the EW test; or
  2. Risk Adjusted Capital (RAC) Floor – In the event that RAC, as reported by EEI on its MFR, falls below $300,000. EEI may cure this event by contributing, within 10 business days of the MFR due date, the amount of regulatory capital that, had it been included in Regulatory Financial Statement Capital at the relevant date, would have increased RAC to an amount that exceeds $300,000.

Other Terms and Conditions Remain in Force

8. For greater clarity, in the event that a Financial Monitor is no longer required as provided in paragraph 3, all other Terms and Conditions remain in full force and effect for the duration of the Terms and Conditions, as set out in paragraph 1.

Ongoing documentation requirements

9. EEI shall prepare an update to the scheduled forecast of expenses at least every three months, to be performed initially within 3 months of the effective date of the Terms and Conditions, for only so long as the Terms and Conditions remain in effect, as set out in paragraph 1.

10. On a monthly basis, EEI shall prepare a continuity schedule of its proprietary security positions, showing all receipts and dispositions, and market value adjustments on a security-by-security basis, for only so long as the Terms and Conditions remain in effect, as set out in paragraph 1.

11. On a monthly basis, EEI shall prepare a comparison of actual and forecasted expenses, by general ledger account, with explanations for variances larger than $5,000 in any single account, and $10,000 overall, for only so long as the Terms and Conditions remain in effect, as set out in paragraph 1.